Carbon pricing causes employment decline, especially in polluting jobs

The study by Christofer Schroeder estimates that a 1% increase in EU-ETS prices leads to a 0.2% decline in aggregate employment after one and a half years.

This impact is more pronounced in polluting jobs, while greener jobs also experience negative, albeit less severe, effects.

The research defines jobs along two dimensions: 'green' (environmentally friendly tasks) and 'polluting' (emissions intensity of the sector).

The analysis leverages exogenous shocks to EU-ETS prices and uses panel local projections to estimate dynamic impacts.

Key findings indicate that the allocation of free emissions allowances and the stringency of employment protection legislation significantly shape these responses.

Fewer free allowances intensify negative employment effects, while stronger employment protection mutes them.

Average weekly hours of work show a small, short-lived adjustment margin.

The EU-ETS, the world's largest cross-border carbon market, is a cornerstone of the EU's climate strategy.

While effective in mitigating emissions, its broader economic impacts, especially on labor markets, are less understood.

The paper investigates the debate on whether carbon pricing 'kills' jobs or spurs 'green' innovation.

It classifies jobs by 'green' intensity (environmentally friendly tasks) and 'polluting' intensity (sectoral emissions).

Most European jobs are found to be neither very green nor very polluting, with significant variations across countries.

The average job has become greener and less polluting over time, primarily due to changes within existing jobs.